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You know it's tough economic times when the Internal Revenue Service says it will waive late penalties and negotiate payment plans for struggling taxpayers. But with 10 million people out of work as tax-filing season approaches, the IRS is changing its rules to show that the tax man does indeed feel your pain. Yesterday, it announced new steps it's taking to help financially-stressed taxpayers who make good-faith efforts to pay up. They include:

Flexibility for missed payments: Taxpayers can skip a payment or get a reduced monthly payment without automatically suspending their existing installment agreement for back taxes. Previously, the full amount would be due if a payment was missed or late.

Home equity adjustments: Because of the cratering housing market, the IRS is setting up a special unit to handle cases where a home's value has hindered efforts to reach an "offer in compromise." An OIC agreement lets a taxpayer who can' meet the periodic payment terms settle a tax debt for less than what's owed. Now in cases when home equity is a roadblock, the IRS will give a second look and can offer options to avoid default.

Speeding up "levy releases": For those whose wages or bank accounts are garnished for delinquent back taxes, the IRS is loosening its requirements for "levy releases" of those amounts.

Expanding its free e-filing program: It will now include virtually all taxpayers, regardless of income level, to speed up payments and refunds.

IRS Commissioner Doug Shulman announced he's giving his tax agents more leeway to work with taxpayers through their problems. "I've instructed all personnel to be sensitive to taxpayers, especially taxpayers who have previously been compliant....If they pick up the phone or write to us, our people have been instructed to work with taxpayers through these tough economic times." But he emphasizes that the IRS will offer help to Americans who seek out help and show why they're unable to pay. Those who fail to file returns or ignore collection notices will get the cold shoulder. "The most important thing for people to do is to get on the phone or walk into an IRS office."

To help you figure out how to file taxes during an economic downturn, check out the IRS' "What Ifs?" page, which explains the tax situation for different scenarios like unemployment, IRA withdrawals, hits to your 401k and home equity woes. If you're having problems and want to get a jumpstart, you can call the IRS toll-free at 800-829-1040.

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